Life Insurance Strategies

Would you put unlimited cash into a fund that guaranteed a 4% return?

Michael Brohawn CFP®, CLU®, CAP®
Your Life Insurance Solution

Mar 15, 2021

Back in 2018, I came across a Canadian universal life policy policy that paid at least a 4% guaranteed return on policy cash value.  The kicker – in the US, you are limited by tax law as to how much can be put into a life insurance policy – in Canada that was not the case.

The policy – issued by Manulife, drew the attention of Canadian hedge funds looking for a place to stash cash at higher than market rates that were guaranteed.  One investor put $11M into the policies as a method to generate extra cash.

Manulife’s Problem

Fixed rates the carrier could generate were much lower, so Manulife was looking at a problem. One expert testified that for every dollar put into the contracts Manulife could lose 45 cents.

Government Intervention

In October of 2018, the Saskatchewan government stepped in and changed the regulations for certain life policies, limiting the amounts that could be contributed and squashing investors’ hopes for unlimited returns.

The folks at Manulife breathed a sigh of relief, but the investors pressed on hoping to overturn the ruling that limited their investment scheme.

Is it over?

Last Wednesday, an appeals court shot the investors down and ruled that the Saskatchewan regulation would stand.  The amount that could be put into a policy would be limited to an amount equal to premium required under the contract.

The hedge fund that brought the case is reviewing the decision, but for now, the search for the pot of gold appears to be over.

Free Book For Wealth Advisors

Michael put the knowledge gained from working with Fiduciaries and Wealth Advisors on thousands of life insurance policies into his first book, The Wealth Advisors Guide to Life Insurance.

An easy to read book, it provides Wealth Advisors with a background in life insurance and outlines the process for the proper selection, use, and management of life insurance.

If you are a Trustee, Attorney, CPA, Family Office or Fee-Based Advisor, Michael is offering you a free copy of the book for a limited time.

5 Steps for Wealth Advisors Acting as a Life Insurance Trustee

5 Steps for Wealth Advisors Acting as a Life Insurance Trustee

If you are a Financial Advisor, Attorney, CPA, or other Professional who has taken on a life insurance trust for profit or accommodation, read on…. Most poeple do not know it, but non-corporate trustees like you oversee almost 80% of trust-owned life insurance. You...

TOLI Trustee Alert: Oops, the Life Insurance Policy Lapsed…What Next?

TOLI Trustee Alert: Oops, the Life Insurance Policy Lapsed…What Next?

A Trustee's most common fear is that a ball drops, and a policy in their care lapses. Unintended lapses do occur, and when they do, knowing how to fix the problem is essential. In this post, I will provide some guidance. Policy lapse can occur when the premium is not...

Download My FREE Guide

The Insiders Guide to Selling Your Life Insurance Policy

More About 

Michael

Wealth Advisor

Resources

Published

Articles

Michael's

Blog

1900 South Harbor City Boulevard, Suite 328 Melbourne FL 32901